Rialto, Midtown Equities Settle Signature Loan Lawsuit

Here’s one way to get Rialto Capital Advisors to call you back: sue.

Just 10 days after Joseph Cayre’s Midtown Equities — a Signature Bank borrower — slung a class action at its new servicer, the parties have settled the dispute, court documents show.

The agreement gives Midtown until August to pay off a $45 million loan backed by 205 Montague Street, a Brooklyn Heights office building slated for residential redevelopment by Jonathan Landau’s eponymous firm.

Rialto, Midtown Equities Settle Signature Loan Lawsuit — Terry Oved of Oved & Oved

The deal effectively honors Midtown’s loan terms under Signature, which included a one-year extension option from an initial August 2024 maturity, the borrower alleges. After Rialto stepped in, Midtown claims the servicer ignored its calls and emails and ultimately refused to honor the landlord’s request for an extension, which jeopardized the Landau deal.

A spokesperson for Rialto did not comment in time for publication.

Hordes of Signature borrowers, sources say and court records show, have faced similar pressures since Rialto started servicing $17 billion in Signature loans, the agreement could serve as a ray of light.

That is, there’s a chance borrowers could prove the Davids to Rialto’s Goliath.

“This swift settlement is a decisive victory for our client – our results speak for themselves,” said Terrence Oved, who represented Midtown alongside his brother Darren Oved.

The heads of Oved & Oved notably beat back Maverick Real Estate Partners when the lender — known to get aggressive, much like Rialto — moved to foreclose on a rental property owned by a Holocaust survivor.

This is the second time Rialto has bent to a Signature borrower in no time.

A year ago, the owner of a Staten Island shopping center sued the servicer, claiming it was being milked for money in a “possibly illegal attempt” to “fabricate a default.” In that case, the sponsor also alleged Rialto had failed to acknowledge an extension on a loan — this one for $14 million.

That case was settled in 15 days.

Parties may settle for a number of reasons, but one is to avoid bad press. It’s possible Rialto, in nipping cases in the bud, is working to preserve its reputation as a servicer on loans in a venture still mostly owned by the Federal Deposit Insurance Corporation.